Eurostoxx Market Characteristics

Spending far too much time in a certain CMC debating thread, I thought I would start a serious (at least in my mind) thread for a change.

I wan't to discuss the behaviour of the Eurostoxx market with seasoned traders as well as traders new to this market. I have recently moved over to the EU market after some years trading the ES and YM contracts. I am not after picking anybody's brain concerning trading systems, but rather how you perceive eustoxx market action in general. In return, I will try to contribute to the best of my ability.

To present myself a bit, my trading style is mainly dependant on Market Profile, buy/sell pressure (by tape reading or/and Market Delta). I am also considering to include EUREX level2 data in my decission making and would like your comment on this. Basically, my entries are based on MP structure and market pace/pressure. I trade intraday and normally hold positions for no more than an hour.

To kick this off just a bit I will start with a couple of observations, wrong or right you tell me:

-Eustoxx market action is highly dependant of the time of the day. Usually moves well during the 1st couple of hours and then basically stalls until the US bond market opens. Once this is absorbed it starts following the globex after the open.

-Eustoxx is highly adaptive to previous high vol points (e.g. as seen from daily MP), and more so than any of the US futures contracts. For example today (3rd of June) it made a t least 6 retests of ydy hi vol point level before finally breaking resistance. I have observered this over and over again. I find this far more predictable than the US market.

Hi Jerry, I am interested in this post as I will be trading Stoxx June 08 Future from Monday - just with a 1 lot to start things off. Does a 300 euro down limit for the day seem reasonable or a bit too tight?

I'm going to be trading technical breaks from congested areas and am keen to read your observations. Hopefully, I'll make some of my own too.

Cheers

JD

I'd say reasonable for a one-lot, equates to 30 points on the underlying

Eurostoxx will trade well from a technical perspective in the am and then in the afternoon you will certainly need to be watching the s&p be careful around the us open as you will often see a false break.
market profile works well for the stoxx, i use ledges to good effect, i use a 5 day merged profile, 5 days we are told is optimum as most traders cant remember what happened more than 5 days ago

daltons book on mp is good but if you are unfamiliar with market profile then i would recomend the cbot pdf CBOT - Educational Materials be warned tho it is a big download, some 300 pages, but without doubt worth a look

Jaydee said:

Hi Jerry, I am interested in this post as I will be trading Stoxx June 08 Future from Monday - just with a 1 lot to start things off. Does a 300 euro down limit for the day seem reasonable or a bit too tight?

I'm going to be trading technical breaks from congested areas and am keen to read your observations. Hopefully, I'll make some of my own too.

Cheers

JD

Click to expand...

Jaydee, thanks for your reply. As my timeframe is shorter than yours I use much smaller stops, normally 5-15 points depending on the structure. I trade 6-12-18 lots depending on the setup and conditions, take 1/3 off at about +5p and let the rest ride with a tightened stop.

I sometimes take BOs if there is enough volume behind and/or if there are clear indications for a trend day.

I will not be trading over the next week, but will watch the market EOD and following this thread.

prop said:

Eurostoxx will trade well from a technical perspective in the am and then in the afternoon you will certainly need to be watching the s&p be careful around the us open as you will often see a false break.

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Yes, I normally keep away from stoxx when the US bonds & S&P opens, unless it's obvious where things are going.

prop said:

market profile works well for the stoxx, i use ledges to good effect, i use a 5 day merged profile, 5 days we are told is optimum as most traders cant remember what happened more than 5 days ago

Click to expand...

Seems like we take similar type of entries, although I think we probably view the MP slightly different. I will look at hi vol points from far back if the level has not been broken since.

prop said:

daltons book on mp is good but if you are unfamiliar with market profile then i would recomend the cbot pdf CBOT - Educational Materials be warned tho it is a big download, some 300 pages, but without doubt worth a look

Click to expand...

Yeah, Dalton's books are the fundament and is a must for every serious MP follower. The issue for me is that he doesn't talk to much about how to trade in practice. For example I've seen a number MP based trade calling services that seem to be in conflict with each other.

Do you, or anybody else for that matter, have any experience of using Level 2 data from stoxx?

prop said:

i use a 5 day merged profile, 5 days we are told is optimum as most traders cant remember what happened more than 5 days ago

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Btw prop, thinking a bit more about it, are you using a 5 day merged profile. i.e. into one cluster, or are you simply looking back at the last 5 seperate days?
I rarely merge days on the stoxx unless they are clearly overlapping.

Thanks for the input guys - I will be careful in the afternoon and have the S&P up in front.

I know market profile but don't have access to it at the moment. Just plain ol' candles for me.

Jerry, I think we're trading a similar time period - my stop is 30 ticks in total for all my trades for the day. So if I did 10 bad trades with a 3 tick stop, I would be out for the day.

I'm thinking of a 5-6 tick stop for the volatile morning and US bond market open, and a 3-4 tick stop during the quieter times.

Jaydee said:

. . . I'm thinking of a 5-6 tick stop for the volatile morning and US bond market open, and a 3-4 tick stop during the quieter times.

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I'd say slightly too tight.

prop said:

Eurostoxx will trade well from a technical perspective in the am and then in the afternoon you will certainly need to be watching the s&p be careful around the us open as you will often see a false break.
market profile works well for the stoxx, i use ledges to good effect, i use a 5 day merged profile, 5 days we are told is optimum as most traders cant remember what happened more than 5 days ago

daltons book on mp is good but if you are unfamiliar with market profile then i would recomend the cbot pdf CBOT - Educational Materials be warned tho it is a big download, some 300 pages, but without doubt worth a look

Click to expand...

Jaydee said:

Thanks for the input guys - I will be careful in the afternoon and have the S&P up in front.

I know market profile but don't have access to it at the moment. Just plain ol' candles for me.

Jerry, I think we're trading a similar time period - my stop is 30 ticks in total for all my trades for the day. So if I did 10 bad trades with a 3 tick stop, I would be out for the day.

I'm thinking of a 5-6 tick stop for the volatile morning and US bond market open, and a 3-4 tick stop during the quieter times.

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Sorry Jaydee, I read you wrong, I thought u were talking about accepting a 30p stop per entry. For the am, my normal stop would be closer to 10p, unless it's the buy/sell pressure is razor sharp in my entry zone.
Personally, I don't use any hard stop for the day, I just keep taking setups according to my trading plan and trust that.

Do you or anyone else take any positions before 9am CET?

hi, yep 5 days all merged into one, the big ledges will act as good support/res
i just trade off the levels so i can stops pretty tight, 4 ticks does the job for me.

as for position times i try to not trade before about 08:30 gmt this gives the market time to find a bit of value after the cash has opened, but if there is a good level i will take the trade

not sure about this level 2 stuff, i just tend to use the price action off TT and a simple 5 min chart
too many knobs and dials and my pee wee brain cant function

prop said:

hi, yep 5 days all merged into one, the big ledges will act as good support/res
i just trade off the levels so i can stops pretty tight, 4 ticks does the job for me.

as for position times i try to not trade before about 08:30 gmt this gives the market time to find a bit of value after the cash has opened, but if there is a good level i will take the trade

not sure about this level 2 stuff, i just tend to use the price action off TT and a simple 5 min chart
too many knobs and dials and my pee wee brain cant function

Click to expand...

Ok, I see. 4 ticks is very tight for me, but you seem to have a good handle on the timing. As for the 5 day merge, what kind of time frame do you have for your positions? (I assume that you hold some overnight based on 5 day merges). I find the entries based on daily profiles very accurate but can certainly see the benefit of taking a longer term position, and in fact I'm looking to increase my timeframe to free up some time, as well as reducing stress.

FYI, I never take a position before the cash opens but would involved immidiately after if I see a strong trend.

Do you ever consider buying/selling tails in the first few periods? They are quite significant in S&P and also in the stoxx from what I can see so far.

jerry828 said:

Sorry Jaydee, I read you wrong, I thought u were talking about accepting a 30p stop per entry. For the am, my normal stop would be closer to 10p, unless it's the buy/sell pressure is razor sharp in my entry zone.
Personally, I don't use any hard stop for the day, I just keep taking setups according to my trading plan and trust that.

Do you or anyone else take any positions before 9am CET?

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Dashing Blade also thinks my stops are a little tight. I may open them up a little and see how I go next week. If I open my stops up to 10 ticks though and if I make 3 bad trades in a row, I'm out for the rest of the day. Yikes!

I will trade before 9 CET if the opportunity arises but I generally don't like trading the first 30-60 mins after open.

hi, i am pretty much short term trading, no overnights, just looking for a reaction at a level, but eventually looking to do it with size, stop wise i am looking to be leaning on some size on the bid/offer ideally and to get a quick reaction, a wam bam thankyou mam if you will , i do run em sometimes but i find it quite stressfull all those ups and downs and whatnot.
i like MP as an invaluable additional tool in my trading toolbox, use both the 5 day and intra day although mainly the 5, also matching up tops and bottoms of value areas, if i can get these in conjunction with a level then thats a good high prob trade for me.
jaydee, its a difficult one with stops, 3 trades with a 10 ticks stop would be no good for me personally, i would rather scratch a couple of trades or maybe take a few 1-2 tick losses and kind of finesse my entry taking a couple of goes to get in but i know a lot of guys who are happy with a bigger stop as long as they have the conviction for the position and the pay off is right.
i think its all down to what you are happy and comfortable with at the end of the day, have a go see how it feels thats the best way to go, just try it for a day or two and see how you feel, i dont think enough people pay attention to how they feel when they trade ( i make endless notes all day on both my trades and my emotions) if you are a quivering wreck then you know it aint for you, on the other hand if you feel comfortable then its good, its also a lot to do with position sizing too.

nice one

Managed to get some time aside for stoxx trading today and really happy about that. After a retest of tuesday highs we go into the biggest trend day in ages. Tried early to buy 3685 for a bounce but didn't get anything off it as the down trend was far too strong. Reversed the position at 3679 and have been holding since then, beautiful. US bonds had a huge impact and kept my shorts during that as I could anticipate what was happening. US market has taken this further down, and it is not over yet,

To be totally honest this was my biggest day on the stoxx so far, doing something like 30% on my account. However, I'm still somehow disapointed with failed ledge trade long. This is the type of thing that makes one think that momentum trades are the only right thing. At least MD works great on this contract with a delta bar setting.

im surprised no one so far has said one of the obvious things, keep an eye on the dax they are very well correlated and the dax tends to make the first moves so its good to look for divergences between the two. try to watch for volumes on a move if theres a big move but very little size going through then the likelyhood is that it will retrace whereas if theres a big move and a lot of size going through then it will normally follow through.

Well, first day and I noticed the morning was v different to the afternoon. There was a lot of congestion on the long side from the open - I couldn't help thinking that if the market had been in bear mode, it would have been a much smoother ride than what we witnessed today. Was expecting more volatility from Friday's mayhem but experienced none.

I waited for the first hour to pass to get an idea of where the market wanted to be, before buying a false breakout at 3689. Stopped out at a 6 tick loss but I now feel that this was too much - 4 would have been enough as it wasn't a particularly volatile day.

I managed to get a nice short from 3602 to 3588 in the morning but missed the afternoon fall from 3616...twice (the first time I was away from my desk though). The second time it was hard to get, it never traded at 16 for long and never retested 16/17, where my order was, despite a good Home Sales figure (what were the analysts thinking at forecasting -0.5% - miles out)? I expected it to trade between 12-17 for a while, as it had done over lunch, but no.

Only did a few trades but finished a little up for the day - plenty of room for improvement.

crude_lover said:

im surprised no one so far has said one of the obvious things, keep an eye on the dax they are very well correlated and the dax tends to make the first moves so its good to look for divergences between the two. try to watch for volumes on a move if theres a big move but very little size going through then the likelyhood is that it will retrace whereas if theres a big move and a lot of size going through then it will normally follow through.

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Thanks for the input crude_lover, I've been looking at the DAX before but didn't pay much attention to that it's the leading contract.

I'm back at the office trading again today after a few days out of town. Missed the wednesday trend day down unfortunately.

Jaydee said:

Well, first day and I noticed the morning was v different to the afternoon. There was a lot of congestion on the long side from the open - I couldn't help thinking that if the market had been in bear mode, it would have been a much smoother ride than what we witnessed today. Was expecting more volatility from Friday's mayhem but experienced none.

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Jaydee, you will find that trend days like friday will most likely be followed by quiet balancing days unless some really extraordinary news comes out. The continuation down from friday occured on wednesday, and I expect thursday to be balancing, although DAX is trying to pull up.